Annualized Total Return

AAA

DEFINITION of 'Annualized Total Return'

The average amount of money earned by an investment each year over a given time period. An annualized total return provides only a snapshot of an investment's performance and does not give investors any indication of its volatility. Annualized total return merely provides a geometric average, rather than an arithmetic average.

INVESTOPEDIA EXPLAINS 'Annualized Total Return'

A mutual fund could earn returns varying from 3 to 5% each year and have an annualized total return of 3.995%. On the other hand, a fund could also be much more volatile, losing 3% in one year, earning 12% in another and have an annualized total return of 4.23%. The difference is the first fund would offer steady returns while the second would offer widely fluctuating returns.


Annualized Return = [(1+R1)*(1+R2)...*(1+Rn)] ^ (1/n)


Where R = annual return for a given year

RELATED TERMS
  1. Compound Annual Growth Rate - CAGR

    The year-over-year growth rate of an investment over a specified ...
  2. Annual Return

    The return an investment provides over a period of time, expressed ...
  3. Average Annual Return - AAR

    A percentage figure used when reporting the historical return, ...
  4. Actual Return

    The actual gain or loss of an investor. This can be expressed ...
  5. Real Rate Of Return

    The annual percentage return realized on an investment, which ...
  6. Return

    The gain or loss of a security in a particular period. The return ...
Related Articles
  1. Mutual Funds: Does Size Really Matter?
    Mutual Funds & ETFs

    Mutual Funds: Does Size Really Matter?

  2. When To Sell A Mutual Fund
    Mutual Funds & ETFs

    When To Sell A Mutual Fund

  3. How To Pick A Good Mutual Fund
    Mutual Funds & ETFs

    How To Pick A Good Mutual Fund

  4. 5 Ways To Measure Mutual Fund Risk
    Mutual Funds & ETFs

    5 Ways To Measure Mutual Fund Risk

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center